Will the property market recover? An expert view
Our current circumstances have brought with them considerable challenges both in terms of our personal and professional lives. When I am finding life a bit tough, I head for the golf course – for me, there is nothing better to clear my head - unfortunately I only managed one game this year before the courses were closed as a result of COVID-19. As head of the firm’s residential property practice I spent the first few weeks of 2020 in my usual state of excitement and anticipation and market commentators have since confirmed that the residential market came out of the blocks at lightning speed at the start of this year. More properties were listed in the first 10 weeks of the year than for the same time last year and sale prices were continuing to rise. In fairness this reflected the steady growth of the market over the past few years and we had started to hear more and more chat about the property “bubble”.
Property “bubbles” are a real thing and they are exciting while they last however like all bubbles they are temporary events. In the property market low interest rates and high levels of investment result in increased demand which cannot be satisfied by the supply of new homes. Prices are pushed up until the bubble inevitably bursts and the market slows or falls.
There can be many reasons why the bubble might burst however it is fair to say that a global pandemic was not one that anyone was predicting. The important thing to realise however that if the result of the current crisis is the slowing down of the market it was in all likelihood going to happen anyway.
Is it a reason to panic? Not in my opinion. I have worked in the Edinburgh residential market for close to 40 years. I watched a property market steadily grow and prices increase during the 70’s and 80’s however by the time we had reached the 90’s those of us with mortgages were struggling to cope with interest rates of 13-14%. A struggling economy resulted in a fall of around 20% in property prices and for those in the market it was as if their world was coming to an end. But not so – the economy started to recover and by the time we moved beyond the millennium the market was flying again. Average house prices rose by over £100,000 between 2000 and 2005. A new bubble was being created.
However that was burst by the global recession of 2007-8 that saw average house prices drop to the levels they were at 4 years previous. Slowly but surely the recovery began and the property market has been riding the crest of a wave for the last 5 years.
Nobody can yet say how the present crisis is going to impact the property market. For many obvious reasons the market has to a large extent ground to a halt at the moment. Surveyors are unable to produce a Home Report so you can’t market your property for sale. If you did manage to get your property on the market before the lock-down no-one is allowed to view it. That said there is still some activity and only this morning I have taken two notes of interest from prospective buyers.
Neither can anybody tell you what the recovery will look like – will the lifting of restrictions see a slow and cautious return of activity – the U shaped recovery that some experts predict – or will the raising of restrictions result in a flurry of new activity – the alternative V shaped recovery mooted by some.
History dictates that the property market will recover and will probably flourish once again. In ten years’ time I am confidently predicting that the value of my house will have risen – probably by the same amount as my golf handicap!
If you have any questions about your property or would like to discuss the current market conditions, please get in touch.Back to news list